On the eve of their deadline for ruling on the Boeing-Lockheed Martin proposal to merge their rocket manufacturing businesses, U.S. federal regulators were dealing with a flurry of developments that will complicate their task, including an anti-trust lawsuit filed by a newcomer to the launch business.

At press time Oct. 21, the U.S. Federal Trade Commission (FTC) had yet to make a decision on United Launch Alliance (ULA), which would combine production and sales of Boeing's and Lockheed Martin's respective Delta 4 and Atlas 5 rockets under one roof. The deadline for the ruling, which could be approval, disapproval or simply a formal request for more information from the companies, was Oct. 24, according to industry sources.

On Oct. 19, Space Exploration Technologies Corp. (SpaceX), the rocket startup founded by Internet tycoon Elon Musk, sued Boeing and Lockheed Martin in the U.S. District Court for the Central District of California, charging that the companies have conspired to violate anti-trust laws to corner the market on U.S. government launches. While SpaceX's concerns predate the May unveiling of plans for ULA, the lawsuit specifically seeks to block the merger.

SpaceX also wrote the FTC the week of Oct. 17 urging it to reject the merger or, failing that, at least require Boeing and Lockheed Martin to accept a consent decree relinquishing their virtual lock on Air Force launch business.

The FTC is consulting closely on the matter with the Air Force, which supports the merger. Mitch Katz, a spokesman for the FTC, said the agency does not comment on pending decisions on corporate mergers.

Boeing spokesman Dan Beck called the SpaceX lawsuit "completely without merit" and predicted the government would approve the creation of ULA.

"United Launch Alliance is going through all the appropriate FTC assessments with regard to anti-trust issues and we are confident that at the end of that process it will be approved," Beck said Oct. 21.

SpaceX's lawsuit follows concerns expressed to the FTC in September by Northrop Grumman Corp., which does not build rockets but competes with Boeing and Lockheed Martin for U.S. government satellite business. Virtually all of the satellites that Northrop Grumman builds or seeks to build would launch on either the Atlas 5 or Delta 4, and the company is seeking formal assurances that ULA will not use its monopoly position in launch to skew satellite competitions in favor of its parent companies.

Jeff Grant, vice president of business development at Northrop Grumman Space Technology of Redondo Beach, Calif., said the company is seeking a formal, binding commitment that endures leadership changes both in government and at Boeing and Lockheed Martin. As of Oct. 21, Northrop Grumman had received no such assurances, he said.

In an interview, Grant said Northrop Grumman is not opposed to the formation of ULA, but he laid out a number of scenarios - referred to as "unintended consequences" - in which his company's satellite business might be adversely affected. The common theme to these scenarios is that as a monopoly provider - and one that answers to Boeing and Lockheed Martin - ULA might not have the incentive to work with Northrop Grumman to develop the strongest possible bids on satellite programs. Variances between Atlas 5 and Delta 5 in performance and price, even if subtle, can make the difference between a competitive and a noncompetitive bid in satellite procurements, Grant noted.

Of immediate concern to Northrop Grumman is the competition to build a new series of geostationary weather satellites for the U.S. National Oceanic and Atmospheric Administration, Grant said. Boeing and Lockheed Martin also are competing for that contract, and Grant said the viability of some of the design concepts Northrop Grumman is considering could hinge on how accommodating ULA officials are willing to be.

Tom Jurkowsky, a spokesman for Bethesda, Md., based Lockheed Martin, said his company will remain an honest broker. "We're committed to fair and equal treatment across the board," he said Oct. 21. He also said Lockheed Martin disagrees with SpaceX and that the creation of ULA would preserve two sources of launch vehicles for the government while saving money.

SpaceX's concerns with Boeing, Lockheed Martin and ULA are directly related to competition for U.S. government launch business.

When the Air Force announced this spring that it intended to forgo a competition for 23 upcoming launches and instead divide the business between Boeing and Lockheed Martin, SpaceX complained that going ahead with the so-called Buy 3 procurement would shut SpaceX out of that market through at least 2011.

After the Air Force dismissed SpaceX's concerns, the company took its complaint to the U.S. Government Accountability Office and later to the U.S. Court of Claims seeking an injunction against Buy 3. That case is still pending.

SpaceX's lawsuit covers much the same ground as its Buy 3 protests, but also alleges a pattern of anti-competitive practices on the part of Boeing and Lockheed Martin that violate U.S. antitrust laws.

The Air Force has been giving Boeing and Lockheed Martin money outside of launch contracts in order to keep both rocket firms in the business. SpaceX maintains that the Air Force's so-called assured access payments constitute an unfair infrastructure subsidy that would put the company at a disadvantage as its attempts to bring a competitor to the Atlas 5 and Delta 4 into the market.

SpaceX's suit requests that the merger be stopped and seeks unspecified damages.

SpaceX has multiple launch contracts with the Department of Defense for the Falcon 1, a small rocket slated to make its launch debut before the end of the year. In recent months, SpaceX has announced plans to build a much larger rocket, the Falcon 9 that would compete directly with the Delta 4 and Atlas 5. SpaceX says it has sold a Falcon 9 launch in 2007 to a U.S. government customer that it cannot name, prompting speculation that the customer is an intelligence agency.

SpaceX also has sold a 2008 Falcon 9 launch to Bigelow Aerospace, a Las Vegas company building a privately financed inflatable space module.

Jeffrey Bialos, a former deputy under secretary of defense for industrial affairs who reviewed mergers including Boeing's acquisition of Hughes Electronics' satellite manufacturing business, said any decision on the merger must be made with an eye to preserving competition.

"If you allow a deep consolidation like this you have to lower the barriers of entry to other potential participants who think they can bring a more affordable launch along," Bialos said.

Meanwhile, the government watchdog group Citizens Against Government Waste came out Oct. 20 against the merger for reasons similar to those cited by SpaceX. "The structure slams the door on any competition," Tom Schatz, president of the group, said in a prepared statement. "The ULA locks up all contracts, ensuring high costs for taxpayers and stifling innovation."